For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.

My brother-in-law will be graduating from college in a few days, and that has me thinking back to when I started my career a few years ago.

As I set out on my own, I had many questions about finances: How much should I spend on rent? Should I have a roommate? What car should I buy, and how I will afford to keep gas in the tank? (And, of course, how many pairs of shoes can I afford?)

If you’re among those entering this new and exciting time in life, I’m sure you’re already receiving a ton of advice. Surprisingly, the best financial guidance I received—advice I shared with my brother-in-law, and which I’ll share with you—is to keep retirement in focus.

This may seem odd. After all, you’re just starting your career, so why think about retirement? You’re likely worried about more immediate financial considerations, like how to pay down student loans, save for a home, or just pay the bills. Yet, as you start earning, the following pointers I received are worth noting:

Start saving early. Every dollar you save now will make a difference later. The reason is the power of compound interest—the earlier you save, the more years your money has to take advantage of this principle. (Not a familiar concept? See just how powerful an early start can be.)

Make it automatic. If you set it, it’s harder to forget it. If your employer offers a retirement plan such as a 401(k) or 403(b), enroll and start contributing. You may barely notice the difference in your monthly earnings. Also, if your employer offers to match your retirement contributions up to a certain percentage, don’t pass it up. (Would you ever ask your boss to reduce your salary? Missing out on a matching contribution isn’t much different.) You can also consider automatic purchase plans that regularly direct money from your bank account or paycheck into an investment account.

Keep it simple. As you start this new phase in life, you already have plenty of decisions to make. If you’re not sure how to invest your money, consider the benefits of an “all-in-one” fund, such as a target-date fund. Funds like these can simplify investing while still providing a well-diversified portfolio. (Vanguard has just announced lower fund minimums on many funds, including our Target Retirement Funds, making it easier than ever for you to start saving now.)

Find a balance. The key is to find the right balance between spending today and saving for tomorrow. You’ll work hard for your income, and you should enjoy it. But consider the “opportunity cost” of your purchases: living in luxury now could cost you later in life. For me, setting a budget was ultimately about tradeoffs—prioritizing what I cared about most and making frugal choices elsewhere. I chose to live by myself, but in a relatively inexpensive apartment. I bought a used car to avoid unnecessary debt and carpooled with peers to save on gas. I avoided big-ticket items like major electronics, but (having just moved to a new location) chose to spend more on going out with friends. And shoes. I continued to spend on shoes.

I wish you the best of luck as you begin this next stage of life.

Notes: Like all investments, mutual funds are subject to risks, including possible loss of principal. Diversification does not ensure a profit or protect against losses in a declining market. Investments in Target Retirement Funds are subject to the risks of their underlying funds. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the fund’s target date.

Like this:

Charu Chander Gross

Charu Gross is head of Vanguard's Education Savings Group, responsible for providing 529 education savings offerings to state and retail clients. She joined Vanguard in 2005 and has worked in several roles spanning human resources, Vanguard Advice Services Group, and Vanguard Retail Services where she was head of Voyager Select®, overseeing 200 employees serving clients with assets ranging from $500,000 to $1 million. Charu earned a B.S. in economics from Penn State. She holds FINRA Series 6, 7, 24, 26, and 51 licenses.

Comments

Richard G. | November 28, 2015 12:09 am

I graduated in 1973 with a degree that I never used or could get a job in that field.I can almost remember back that far. As a single person just out of college the last thing on my mind was retirement.Two years after I graduated I got a job in our state retirement office and we were the office that computed What the state retirees were going to get after they hung it up.My whole perspective changed after seeing hundreds of people coming into our office and left crying because they had never checked up on there job benefits and low and behold their employers never took out the correct retirement % to fully fund their retirement.I left the state 4 years later and I swore I would never put myself in that position ever.So I am a believer in going to and getting a copy of your employee benefits package from your personnel office and READ the thing.The most important form in that packet(for retirement anyway) is the w-4 form.I would tell any young person starting out let your employer subsidize your retirement.If you READ the information and you find out you can save 15% in your IRA/401k then claim 3 additional exemptions on the w-4 form.So counting yourself you would claim 4 total.So your boss starts taking real light on you for Income tax during the year and guess what you put this money into YOUR IRA.This one step alone will make it extremely easier to fund your IRA.He won’t hit you at the end of the year because he can’t”see” this money sitting in your IRA.Good Luck to All!

Anonymous | May 27, 2011 9:22 pm

When I was in my twenties, I started saving for retirement, but I also spent significantly more money than necessary on other things such as shirts and ties. I am now 51 and I am nowhere close to having enough savings. I now wish I had saved more at an early age for retirement (and also for emergencies and major purchases), and I wish I had spent less money on shirts and ties and other relatively small purchases that add up and put a dent in the budget.

Anonymous | May 20, 2011 7:28 pm

Anonymous | May 16, 2011 10:48 pm

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For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.